Oil drops as Trump halts Hormuz reopening push, raising hopes of de-escalation

Oil prices fell in early Wednesday trade after Donald Trump said the United States would pause efforts to reopen the Strait of Hormuz, signalling a potential window for negotiations even as the broader blockade remains in place.

US West Texas Intermediate (WTI) crude declined by more than $2 in initial reaction, slipping as much as 2.18 per cent to near $100 per barrel. In the latest trade, WTI futures were hovering around $100.96 per barrel, down about 1.28 per cent. Global benchmark Brent crude was also lower at roughly $108.74 per barrel, off about 1.53 per cent.

The move follows a volatile session on Tuesday, when both benchmarks retreated after a fragile ceasefire appeared to hold despite intermittent exchanges of fire between US-Israeli forces and Iran.

Trump said the operation to reopen the Strait of Hormuz would be halted temporarily to assess whether a broader agreement could be reached and signed. However, he indicated that the blockade would continue — underscoring that supply risks have not fully eased.

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US fuel prices remain elevated

The dip in crude prices has yet to translate into relief at the pump. According to GasBuddy, the average US petrol price has climbed to $4.52 per gallon — the highest level since July 2022.

The surge reflects earlier gains in crude as well as domestic supply constraints, including refinery outages and tightening inventories. Elevated fuel prices are emerging as a significant political challenge for Trump ahead of November’s midterm elections.

Demand resilience complicates outlook

Data from the Energy Information Administration shows gasoline demand remains resilient, averaging 8.95 million barrels per day over the past four weeks — up 1 per cent from a year earlier.

At the same time, US gasoline inventories have fallen to 222.3 million barrels, below the five-year seasonal average, raising concerns about supply adequacy heading into the peak summer driving season.

Analysts at Morgan Stanley warn that inventories could drop below 200 million barrels by late August if current trends persist, potentially keeping upward pressure on fuel prices even if crude stabilises.